Wednesday, February 15, 2017

We called the Indian bluff

Merely weeks after cautioning residents that bitcoin companies weren’t authorized or licensed to operate in the country, India’s central bank is reportedly not including bitcoin under the purview of regulations for digital payments. In essence, the cryptocurrency will not be legitimized as a legal form of payment or settlement in an economy which is the world’s largest receiver of remittances, anytime soon. Digital payments and financial technology (Fintech) solutions have caught on rampantly amongst the Indian society in recent times, particularly after a sweeping, unprecedented cash crunch brought on by the government’s demonetization drive. In light of these new innovations, the Payments and Settlement Systems Act of 2007 [PDF], the code by which payment systems are regulated, was amended to include digital payment gateways and platforms. The amended regulations will look to deem physical cash and digital cash as equals, with developments toward interoperability and a unified payments platform as India embraces the digitization of cash. As it transpires, bitcoin will not be included as a valid payment system under the new act, according to a report in Indian publication The Telegraph.

Two issues.One, the Indian government thought they understood how to control digital payments. They do not. In India, what do we find? Indian techs have the smart slim chip for phones they make them into point of sales. That is the endpoint technology for the sandbox. Also they release the payment standard which looks to become a multi-currency layer in the sand box. So the central bank clearly did not understand where this was headed.Second issue. This illustrates a simple point, central banking is a three color trade, their is a seigniorage stream. Cerntral bankers have no three color trade theory, I know because the only sound three color theory is in the head of our Russian mathematician here at Redneck. We keep him locked and incommunicado.